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Kirtsaeng II: Fees in Copyright Cases Depend on Reasonableness of Litigation Position

Under 17 USC § 505, a “court may . . . award a reasonable attorney’s fee to the prevailing party.” However, when deciding whether to award attorneys’ fees under the Copyright Act’s fee-shifting provision, 17 USC § 505, the Supreme Court of the United States held that a court should give “substantial weight to the reasonableness of [the losing party]’s litigating position, but also tak[e] into account all other relevant factors.” In a unanimous opinion, the Supreme Court vacated a decision by the US Court of Appeals for the Second Circuit that affirmed the district court’s denial of Supap Kirtsaeng’s motion for attorneys’ fees from Wiley & Sons. Kirtsaeng v. John Wiley & Sons, Inc., Case No. 15-373 (US, June 15, 2016) (Kagan, J) (Kirtsaeng II).

The case began with Kirtsaeng I, when Kirtsaeng, a citizen of Thailand studying in the United States, discovered that Wiley & Sons, an academic publishing company that sells textbooks in the United States and foreign markets, sold its English-language textbooks in Thailand at a considerably lower price than the price of its virtually identical textbooks sold in the United States. Kirtsaeng arranged for his family and friends to buy the English-language textbooks for him in Thailand, then resold the books to students in the United States for a price below Wiley’s US price but higher than the Thai price, thereby earning Kirtsaeng a profit.

Wiley sued Kirtsaeng for copyright infringement and argued that the first-sale doctrine—which enables the lawful owner of a book to resell or otherwise dispose of it as he or she wishes—did not apply when a book was manufactured abroad, as were those that Kirtsaeng had resold. In a 6–3 decision, the Supreme Court resolved unsettled law and established that the first-sale doctrine allows the resale of foreign-made books, just as it does with respect to domestic ones (IP Update, Vol. 16, No. 3). With this victory, Kirtsaeng returned to the district court and invoked § 505 of the Copyright Act seeking attorneys’ fees. After the district court denied and the Second Circuit affirmed, Kirtsaeng appealed.

Although § 505 grants courts wide latitude to award attorneys’ fees, fee awards should encourage the types of lawsuits that promote the “well settled” objectives of the Copyright Act, which “serves the purpose of enriching the general public through access to creative works” by “striking a balance between two subsidiary aims: encouraging and rewarding authors’ creations while also enabling others to build on that work.”

Wiley argued that “giving substantial weight to the reasonableness of a losing party’s position will best serve the Act’s objectives.” Kirtsaeng “favor[ed] giving special consideration to whether a lawsuit resolved an important and close legal issue and thus ‘meaningfully clarifie[d]’ copyright law.” The Supreme Court found that the “objective-reasonableness” approach, advocated by Wiley, is better at encouraging litigation that promotes the benefits of the Copyright Act, is more administrable, and treats plaintiffs and defendants more even-handedly than Kirtsaeng’s approach.

The objective-reasonableness approach encourages parties with strong legal positions to stand on their rights and deters those with weak positions from proceeding with litigation. The approach is administrable because it asks the court that ruled on the merits of the case to also assess whether the losing party advanced an unreasonable claim or defense—a task courts already do. Kirtsaeng’s approach, on the other hand, is less administrable because courts may not know at the conclusion of a suit whether a newly decided issue will have critical, broad legal significance.

The objective-reasonableness approach also treats plaintiffs and defendants even-handedly, because both can make reasonable or unreasonable arguments. Finally, the Supreme Court made clear that the reasonableness of the position was an important, but not controlling, factor in assessing fee applications. District courts “must take into account a range of considerations beyond the reasonableness of litigating positions,” for example, litigation misconduct or “repeated instances of copyright infringement or overaggressive assertions of copyright claims, again even if the losing position was reasonable.”

The Supreme Court remanded the case to the district court to give the lower court the opportunity to reconsider petitioner’s fee application for more than $2 million in attorneys’ fees accrued from victoriously defending against Wiley’s claim of copyright infringement in Kirtsaeng I.

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